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Menino set to coax nonprofits into hiring

Incentives part of broad jobs plan

By Andrew Ryan
Globe Staff / September 5, 2011

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To encourage job growth, Mayor Thomas M. Menino today will propose financial incentives for hospitals, universities, and other nonprofits to hire out-of-work Boston residents.

Institutions that hire jobless Bostonians would receive a $1,000 or $1,500 credit that would be deducted from the money nonprofits are asked to pay each year in lieu of property taxes. Boston’s top five employers - four major hospitals and Boston University - contributed more than $8.6 million to city coffers last year despite their tax-exempt status.

The nonprofit credits are part of a broad 10-point plan to stimulate hiring that the city will release today as Menino addresses the Greater Boston Labor Council’s annual Labor Day breakfast.

“The mayor knows that the largest employers in our city are hospitals and universities,’’ said Menino’s spokeswoman, Dot Joyce. “Giving them an incentive makes sense in this difficult economy.’’

The Menino administration views the initiative as a complement to an upcoming federal jobs package - about to be unveiled by the White House - that is expected to include some form of tax credits but will probably be targeted more at businesses.

Under the proposal, Boston would give a nonprofit a $1,000 credit for hiring an unemployed resident. The credit would increase to $1,500 if the person had been out of work for six months or more. City officials described the proposal as a modest push to spur hiring. Because the annual payments from nonprofits are technically voluntary, the Menino administration would not need City Council approval to implement the program.

Administrators at Boston’s largest nonprofits declined last week to discuss the credits and whether they would encourage hiring because they had not yet learned full details of the mayor’s proposal. That made it difficult to gauge the impact that a $1,000 to $1,500 credit might have on a billion- or million-dollar institution.

“Is it too modest to have an effect? That’s a good question,’’ said Alan Clayton-Matthews, an economist at Northeastern University. “But any little bit might have an effect on the margin; you never know. In a way it provides some potential for publicity for the nonprofit and the city. And maybe that publicity is worth more than $1,000.’’

But the jobs push comes as Boston is asking tax-exempt institutions to significantly increase how much they pay for basic city services. At the same time, hospitals and universities will probably face federal cuts that will not be offset by a $1,000 to $1,500 credit, said Samuel R. Tyler, president of the Boston Municipal Research Bureau, a fiscal watchdog funded by business and nonprofit institutions.

“Short-term, I don’t see that it would have that much of an impact,’’ Tyler said of the credit.

As in Massachusetts as a whole, the job market in Boston has fared significantly better than others nationwide. The most recent data from July show an unemployment rate in the city of 7.9 percent, a smidge above the state, but far below the national rate of 9.1 percent.

But even a 7.9 percent unemployment rate leaves the city with a large number of people looking for work. In lower-income and minority neighborhoods, the number is significantly higher, city officials said.

In addition to the nonprofit credit, Menino’s 10-point jobs initiative will include overhauling the city’s permitting process to eliminate unnecessary impediments for businesses. As an example, the administration cited what it described as redundant dumpster permits and suggested consolidating an array of construction permits.

Menino will push for more development incentives like the tax breaks and state-financed infrastructure improvements that enticed Vertex Pharmaceuticals to build its $800 million headquarters on Fan Pier in the South Boston waterfront. The city also will seek support from private companies to expand job training programs and plans to overhaul its vocational schools to prepare more city residents for technical, trade, and health care work.

But the most innovative idea is the credit for nonprofits.

Some hospitals, universities, and other nonprofits have long paid the city cash to compensate for the cost of police, fire, and other basic services. But the system of payments in lieu of property taxes, or PILOT payments, varies widely. Some institutions pay millions; others pay significantly less.

In fiscal 2010, the city collected more than $31 million from nonprofits, but officials have been pushing to increase the cash payments. Credits for hiring unemployed residents would reduce an institution’s contribution.

“Potentially, it could make a difference,’’ said City Council President Stephen Murphy, who served on a task force that examined the payments that nonprofits make in lieu of taxes. “I can see the rationale behind it. I’d like to see the plan itself overall before I endorse it wholeheartedly, but there’s a certain level of creativity there. I see the ingenuity.’’

The proposal, however, may not sit well with those who feel the city should take even stronger steps to squeeze more money out of hospitals and universities. At the same time, some institutions have flatly rejected the city’s push to collect more revenue because they argue that nonprofits have a well-established legal right to remain tax-exempt.

In general, a city’s best defense against unemployment is to create an environment that is attractive for businesses and also be a place where skilled workers want to live, said Clayton-Matthews, the economist from Northeastern. In the short term, however, a mayor has few real tools to make an immediate impact.

“But you can’t fault the mayor or the state - or anyone - for trying a proposal that may add jobs in this economic environment,’’ Clayton-Matthews said.

Andrew Ryan can be reached at acryan@globe.com.